Lombardy took over the market from loan companies after the introduction of legal restrictions, and at the same time “effectively bypass all consumer loan regulations”, estimates the Federation of Polish Entrepreneurs (FPP). The organization calls for an urgent regulation of the pawnshop market.
Thus, legally operating loan companies – which are subject to meticulous regulations – have limited opportunities to operate, while pawnshops make coconuts, effectively bypassing all consumer loan regulations. It is enough for the pawnshop loan to be granted in the form of a purchase agreement with the right to repurchase them by their prior owner, and all legal restrictions on consumer credit – both from the Consumer Credit Act and the special covid act – will not apply.
In practice, the lending activities of pawnshops remain completely unregulated, while the remaining forms of lending activities are strictly regulated under the applicable regulations. As a consequence, consumers using financial services provided by pawnshops are not provided with protection, and the actual interest rate on loans in pawnshops is as high as 550%. per year.
According to FPP, the regulations should not restrict access to financing for those who need it most, but on the other hand create a uniform legal framework enabling equal competition between all types of consumer loan institutions.
“Already in 2019, we pointed out to Minister Warchoł that tightening the bolt on the market of legally operating loan companies and the lack of regulation of pawnshops would end this way. And the pandemic further aggravated these pathologies. Thus, the government – instead of helping consumers – pushed them into more expensive and worse options. Therefore, we have a situation where the regulations limited access to financing from legal lending institutions. Consequently, people who urgently need to supplement their financial liquidity have been forced to look for other, more expensive and risky alternatives. in such cases, there are services offered by pawnshops,” said the chairman of FPP, the president of the Center for Legislative Analyzes and Economic Policy (CALPE), Marek Kowalski.
In March 2020, as part of the so-called of the special covid act, provisions were introduced that additionally reduced the level of acceptable non-interest costs of consumer credit in relation to the regulations already in force, introduced in 2016 as part of the amendment to the Consumer Credit Act. Moreover, if another loan is granted within 120 days – if the previous loan has not been fully repaid so far – the maximum amount of non-interest costs is limited to the limit applicable to the first loan. Although the provisions of the special act in this area were to apply for 365 days from the moment of its introduction, at the beginning of this year the period of their application was extended until June 30, 2021.
Source: FPP and ISBnews
